In any form of business, funding is one of the most important criteria. Funding can be of different types, but business turnover is a vital factor for selecting such funding options. Personal financial support is not always possible for everyone and it is also not a recommended option for any business. Among the external funding options, business loans from financial institutions or banks and Merchant Cash Advance are the two options. In many cases, getting a loan from any bank is almost impossible for the small business owners. In such cases, Merchant Cash Advance is one of the best forms of funding option.
What is a Merchant Cash Advance?
MCA was originally prepared as a lump-sum payment in lieu of a percentage of future credit or debit card sales that has been agreed. However, the term at present describes a variety of small business financing options with short payment terms. To grow a business, cash flow is very important and for that different aid is being taken, among which Merchant Cash Advance is the most popular. This type of funding is used by the entrepreneur when he lacks credit rating or collateral. After signing the contract, the establishment receives some amount of finance and in turn, the provider possesses the right to have a part of the credit card sales of the company every month till the amount of contract is reached.
Top seven advantages of MCA over business loans
- No credit or collateral is required – As, the type of funding is not dependent on any credit score, rather on the future credit card sales, so, this is a safe option to get cash. Whatever, the type of credit score a business have, it does not affect this funding process.
- Fast cash access – Like commercial loans, there is not so much of paperwork. While a loan can take around months to get processed, this type of funds requires minimal time to get processed. As a result, one can avail and access fast cash in times of immediate fund requirements.
- Approval rate is high – Unlike commercial loans, there is minimal or negligible amount of rejection in MCA. The type of funding has usually highest form of approval rate as advances are rarely denied.
- Collection is as per revenue generation – For any business loans, company with low sales rate, faces problems for monthly payments. In case of MCAs, repayment happens when the company really makes money.
- The funds available can be used without any restriction– The funds in this case can be used for buying inventories, growing your business or any other purposes, instead of any fixed areas as in commercial loans.
- Simple and hassle-free process – applying for a commercial loan and getting approval for the same is not an easy task. This might take months and sometimes rejected also. However, MCA is also a funding option for small businesses that is simple as well as hassle-free. This is revenue based and so you do not have to think about the payback.
- Affordable – Many entrepreneurs have fears that MCA is highly expensive, but in reality this is beneficial and affordable. The affordability allows business people to remain viable without cutting their budgets as like loan payments.